Proposal Would Create CalPERS Retiree Health Care
Liabilities Fund

July 10, 2006 (PLANSPONSOR.com) - Facing a new
accounting standard governing the booking of their retiree
health care liabilities, the nation's largest public pension
plan proposed a new investment fund into which governments
would invest dollars to cover those benefit costs.

Coupled with about $205 billion in pension assets that
the California Public Employees’ Retirement System
(CalPERS) already manages, the new fund would give it even
more clout on Wall Street and financial markets worldwide,
the Sacramento Bee reported.

Beginning in 2008, the Government Accounting
Standards Board’s
Statement 45
will require large governments to apply the same accounting
standards used for pension liabilities to payments and
services provided for retirees other than pensions
(See
GASB Issues New Standards for Post-Retirement Benefits
). Under the GASB rule, officials must book the long-term
cost of employee health retirement benefits on their
balance sheets and disclose the amount needed each year to
fund the entire obligation.

According to the Bee report, the California State
Association of Counties and League of California Cities are
lobbying for the CalPERS bill, Senate Bill 1729, by state
Senator Nell Soto. The measure is scheduled for an August 9
hearing in the Assembly Appropriations Committee.

The expectation is that even though government agencies
won’t be required to set aside assets to pay the retiree
benefit liabilities, many will want to pay that expense for
fear that it would otherwise not look good to their credit
rating agencies, the Bee said.

The CalPERS bill allows any public agency, from large
counties to small fire districts, to invest money in a plan
the fund administers. CalPERS trustees are weighing the
issue and considering options ranging from providing
actuarial consulting to creating a dedicated retiree health
benefits investment fund. Increasingly, public agencies
have urged CalPERS officials to set up a full-service
program.

Advocates say it would be a natural fit for CalPERS,
which administers pension benefits for the state and 1,142
public agencies, including 29 counties and 304 cities. It
also is the nation’s third-largest purchaser of health
care, buying more than $4 billion in coverage a year for
1.2 million state and local government workers.

Ohio’s government is one of a few that have built up a
sizable fund. With current state employees contributing 4%
of their salary, the Ohio Public Employees Retirement
System has amassed about $12 billion in a retiree health
trust.